Japan’s economy sails through the storm

Friday, 2021-02-19 10:28:41
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FILE PHOTO: Pedestrians wearing protective masks amid the COVID-19 outbreak, walk on a street in Tokyo, Japan, February 2, 2021. (Reuters)
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NDO – Japan’s Cabinet Office recently reported that the real gross domestic product (GDP) of the country in Q4 2020 increased by 12.7% over the same period in 2019. Such an economic growth rate, together with positive signals from exports and the stock market, indicate that the world’s third largest economy is now on the path towards successfully overcoming the “COVID-19 storm”.

The Cabinet Office cited initial estimates showing that Japan’s real GDP in Q4 2020 surged by 3% over the previous quarter, marking the second consecutive growth quarter for Japan’s economy since the outbreak of COVID-19 in early 2020. Earlier, in Q3 2020, Japan’s real GDP posted a year-on-year hike of 22.9%, the highest increase since 1980. According to analysts, the aforementioned statistics show that Japan’s economy has continued to recover strongly despite the pandemic.

The Japanese stock market also sent positive signals. Last week, the Nikkei index on the Tokyo Stock Exchange (TSE) once ended up at 30,006.46, reclaiming the 30,000 level for the first time in the past 30 years. The rise was attributed to the impact of positive developments from the US stock market, as well as investors’ expectations on the prompt control of the pandemic after the Japanese Government formally approved Pfizer Inc.’s coronavirus vaccine. In addition, optimistic statistics announced by the Cabinet Office have positively affected investors’ psychology. More good news to Japan’s economy is that agricultural exports reported record growth despite difficulties caused by the pandemic. The Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) announced that the country’s agro-forestry and fishery exports reached US$8.74 billion in 2020, maintaining a record high growth rate for the eighth successive year.

These highlights were said to be the results of the Japanese Government’s drastic disease fight and economic recovery measures in recent times. Last year, the Japanese Government designed a strategy to boost agricultural exports, focusing mainly on 27 products, including beef and yellowtail. In addition, the Government used “resuscitation medicines” to help businesses stand firm in the stormy period caused by COVID-19. The Japanese Ministry of Economy, Trade and Industry continues to announce plans to support businesses affected by the pandemic. Accordingly, the highest level of support is US$5,700 for small and medium-sized enterprises and US$2,800 for the owners of business establishments. Those considered for support include food and beverage establishments, environmental sanitation facilities, agricultural cooperatives, and fishery cooperatives, among others. Previously, the Japanese Government decided to spend US$10.8 billion from the reserve fund of the 2020 fiscal budget to support business establishments in overcoming difficulties caused by COVID-19.

Japanese Prime Minister Suga Yoshihide also strengthened measures to loosen finance to support enterprises. In the fiscal year 2020, which will conclude by the end of March 2021, the Japanese Government has set up a JPY11.5 trillion contingency fund to cope with the pandemic. In a recent online exchange with business leaders, Bank of Japan (BOJ) Deputy Governor Masazumi Wakatabe affirmed that the BOJ has no intention of narrowing the scale of monetary easing in the current period. In addition, the Cabinet of Japan has passed bills to promote digitalisation with a focus on the establishment of a digital agency this September. The establishment of the new agency and the upgrade of computer systems at central and local agencies are expected to help improve the quality of public services, facilitate people and businesses, and support economic growth.

In parallel with the measures to promote economic growth, Japan has been exerting great efforts to contain the COVID-19 pandemic. After the Japanese Government declared a state of emergency due to the pandemic in Tokyo and three neighbouring provinces in January, the state of emergency has been extended to seven other provinces. According to Japanese media, the Japanese Government is considering the possibility of nationwide coverage of COVID-19 vaccines. Accordingly, free and mass vaccination for the Japanese people will be implemented from the end of May.

Businesses are expecting the aforementioned measures to help spread economic bright spots and soon bring Japan’s economy back to a normal state in 2021. It is predicted by many economic experts that the recovery momentum of Japan’s economy may be suspended in the first quarter of this year due to the resurgence of COVID-19. However, if the pandemic fight and economic recovery plans are effectively implemented, Japan’s economy will surely realise its “dual goal” and overcome the “COVID-19 storm” in 2021.